IQE plc: Trading Update
IQE plc
Cardiff, UK24 November 2021
Trading Update
- Emerging
softness in smartphone-related demand
-
Continued weakness in roll out of 5G infrastructure
- Ongoing
foreign exchange headwinds on reported numbers
- Constant
currency revenues now anticipated to be down by circa 8%
year-on-year
IQE plc (AIM: IQE, "IQE" or the "Group"), the
leading supplier of compound semiconductor wafer products and
advanced material solutions to the global semiconductor industry,
announces a trading update for the year ending 31 December
2021.
Wireless Update
Demand for Wireless GaAs epi-wafers has
continued to grow in H2 2021, driven by 5G penetration of the
smartphone handset market and WiFi 6. Whilst growing year-on-year,
GaAs volumes are below management expectations in Q4, in the
context of softening demand within the broader smartphone supply
chain.
Despite the challenges of supply chain
constraints within the broader semiconductor industry, the solid
performance of GaAs throughout 2021 has resulted in high
utilisation at the Group’s Taiwan facility, where the Group is
investing in eight new and refurbished tools. This includes three
new Aixtron G4 reactors which are now on-site and being
commissioned to support further growth in 2022.
Sales of Wireless GaN epi-wafers have continued
to be weak due to end-market dynamics, including significantly
lower levels of mMIMO base station deployments in Asia and the slow
rate of deployments in Western markets. GaN remains an essential
material for 5G infrastructure and demand is still expected to
recover over the multi-year deployment cycle.
Photonics Update
Demand for VCSELs used in 3D sensing
applications has remained solid throughout H2 2021 but is expected
to tail off towards the end of the year in line with supply chain
seasonality and general softening in smartphone supply chains.
Sales of other Photonics products are also below
management expectations in Q4 due to the re-phasing of certain
defence and security orders associated with large programmes into
2022 and the slower introduction of sales of new DFB products.
R&D
Update
Strong progress continues to be made on research
and development programmes, with significant milestones reached for
long wavelength VCSELs, advanced healthcare sensing, Porous Silicon
for front-end module switching and the commercialisation of GaN on
Si technologies for infrastructure markets.
Operational
progress
Operational progress has also been strong, with
the closure of the Group’s Pennsylvania facility and associated
consolidation of MBE capacity in North Carolina which is on
schedule for completion by 2024.
The recently announced closure of the Singapore
facility is also on track and due to be completed by mid-2022.
These closures are part of the Group’s consolidation strategy and
will improve production efficiency and margins in the medium to
long term.
Outlook and Guidance
A significant foreign exchange headwind has been
incurred in 2021 on a reported basis, caused by the relative
strength of Sterling, versus the US Dollar in which the majority of
IQE’s revenues are denominated.
As a result of softening demand in Q4, IQE now
expects full year reported revenues to be in the region of GBP
£152m. This is equivalent to circa £164m at constant currency,
representing circa 8% reduction in revenues year-on-year.
The resultant reported Adjusted EBITDA is
expected to be in the region of GBP £18m. This is equivalent to
circa £25m at constant currency, representing an EBITDA margin of
circa 15% at constant currency (FY2020 17%).
Cash capex in the year is expected to be in the
range of £14m to £17m compared to the previous guidance of £20m to
£30m, due to the phasing of payments for certain tool purchases
into 2022. Net debt is expected to be less than £10m.
Phil Smith,
Interim Executive
Chairman of IQE, commented:
“Whilst it is disappointing that 5G
infrastructure deployments have remained weak all year, we still
expect this macro trend to provide a multi-year growth cycle for
IQE. In the immediate term, broader semiconductor market shortages
have softened demand in some supply chains but we believe these
effects to be temporary and remain excited by the opportunities
ahead.
Meanwhile IQE has made significant strategic and operational
progress in 2021. This has laid strong foundations, which newly
announced CEO Americo Lemos will look to capitalise on as he sets
out his strategy for the future direction of the business next
year.”
Contacts:
IQE plc+44 (0) 29 2083
9400Phil SmithTim PullenAmy
Barlow Peel
Hunt LLP (Nomad and Joint Broker)+44 (0) 20 7418
8900Edward KnightPaul GillamJames
Smith Citigroup
Global Markets Limited (Joint Broker)+44 (0) 20 7986
4000Christopher WrenPeter
Catterall
Headland Consultancy (Financial PR) + 44
(0) 20 38054822Andy Rivett-Carnac: +44 (0) 7968 997 365Chloe
Francklin: +44 (0)78 3497 4624
This announcement contains inside information
for the purposes of Article 7 of the UK version of the Market Abuse
Regulation (Regulation (EU) No 596/2014). The person
responsible for arranging and authorising the release of this
announcement is Tim Pullen, Chief Financial Officer.
Glossary
GaAs |
Gallium Arsenide |
GaN |
Gallium Nitride |
mMIMO |
Massive MIMO (Multiple-Input, Multiple Output) |
VCSEL |
Vertical Cavity Surface Emitting Laser |
DFB |
Distributed Feedback Laser |
About
IQE
http://iqep.com
IQE is the leading global supplier of advanced
compound semiconductor wafers and materials solutions that enable a
diverse range of applications across:
- handset devices
- global telecoms infrastructure
- connected devices
- 3D sensing
As a scaled global epitaxy wafer manufacturer, IQE is uniquely
positioned in this market which has high barriers to entry. IQE
supplies the whole market and is agnostic to the winners and losers
at chip and OEM level. By leveraging the Group’s intellectual
property portfolio including know-how and patents, it produces
epitaxy wafers of superior quality, yield and unit economics.
IQE is headquartered in Cardiff UK, with c. 670
employees across nine manufacturing locations in the UK, US, Taiwan
and Singapore, and is listed on the AIM Stock Exchange in
London.
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